The Cost of Drugs for Rare Diseases Is Threatening the U.S. Health Care System

Executive Summary

Biogen’s pricing of Spinraza, a new drug for treating infants with spinal muscular atrophy (SMA), signals a larger threat to the U.S. health care system: the cumulative cost of therapies for rare diseases may be impossible to bear. Five days after the FDA approved the drug in December, Biogen announced each dose would cost $125,000. Given that patients need six doses in the first year and three per year after that, it means the drug costs $750,000 in the first year and $375,000 thereafter. Unless the United States acts now, we will no longer be able afford FDA-approved treatments for rare diseases. Any successful plan to manage rising drug costs must address multiple aspects of the problem, including value-based pricing, transparency, allowing Federal payers to negotiate price discounts, drug re-importation, and the reform of the Orphan Drug Act.

No parents should have to watch their child die, yet my former colleague “Will” and his wife “Mary” watched powerless as two of their children succumbed to spinal muscular atrophy (SMA). “Isaac” and “Lizzy” were never able to sit, talk, or eat on their own, and each passed away as toddlers.

SMA is the most common genetic cause of infant mortality, affecting 1 in 11,000 newborns yearly. Infants with SMA1, the most common and severe form, develop progressive paralysis before six months. Most die before their second birthday. The genetic cause of SMA, a mutation in the spinal motor neuron 1 gene (SMN1) was discovered 20 years ago, but despite intensive research, no effective therapy was found — until now. In December, the U.S. Food and Drug Administration (FDA) announced its approval of nusinersen (sold as “Spinraza”), an effective SMA treatment licensed to Biogen by Ionis Pharmaceuticals.

Nusinersen is an antisense oligonucleotide, a brief DNA sequence that increases SMN protein production. In a landmark trial of 82 infants with SMA, 40% of those receiving the drug achieved motor milestones, including sitting crawling and even walking, compared to none receiving the placebo. The FDA stopped the study early because nusinersen was so effective.

Patients and providers greeted approval with near ecstasy, but the celebration was bittersweet. Five days after the FDA approved, the drug, Biogen announced each dose would cost $125,000. Given that patients need six doses in the first year and three per year after that, it means the drug costs $750,000 per patient in the first year and $375,000 annually thereafter.

There are at least 10,000 SMA patients in the United States. A little over half have SMA1 or SMA2 (the more severe forms). If just this segment were treated with nusinersen, the total cost in the first year would be $3.8 billion and the annual cost thereafter would be $1.9 billion. (These figure do not account for administration costs.) The actual total cost will be larger because, since the treatment is effective and SMA patients will hopefully live longer, the number of SMA patients that will require ongoing treatment will increase over time.

While criticism of drug prices should focus on a patient’s ability to afford treatment and on profiteering by unscrupulous pharmaceutical companies, Biogen’s pricing decision signals a larger threat to the U.S. health care system: the cumulative cost of therapies for rare diseases may be impossible to bear.

Then there’s Will’s heartbreaking reaction, which I’m sure echoes the sentiments of many touched by SMA. “The Biogen announcement of the cost of nusinersen floored me in every way possible,” he says. “Words cannot describe the sickening feeling I get when I think about it.”

A very promising gene therapy for SMA is on the horizon, which would require only one dose and potentially render nusinersen obsolete. Did such mercenary economics influence Biogen’s pricing decision? We may never know; drug companies are not required to justify their prices.

There are 7,000 rare diseases affecting 25 million to 30 million Americans. The average drug approved under the Orphan Drug Act of 1983 (ODA), which governs rare disease approval, costs $118,820 per year. Assuming a similar cost, if a single drug were approved under the ODA for 10% of rare diseases, the total would exceed $350 billion annually — more than 10% of the total amount that America spends on health care and much more than the health care costs attributable to either diabetes or Alzheimer’s disease and other forms of dementia.

At the University of Utah, we follow about 150 SMA patients. If each were treated with nusinersen, the cost would be $113 million the first year and $56 million thereafter (not accounting for newly diagnosed patients). Nusinersen’s extreme price is a challenge for any health care system, particularly those like ours with an accountable care organization responsible for large numbers of patients (200,000 children in our case).

Approaches to contend with costly new therapies range from creating expert panels to approve each patient treated to assigning physicians an annual patient quota. None of these strategies is ideal, and each risks creating an adversarial dynamic between physicians, administrators, and patients.

Coverage decisions should be based on an understanding of a drug’s value (outcomes relative to the cost). In nusinersen’s case, the impact on the quality of life of SMA infants is indisputable.

In the United Kingdom, the National Institute for Health and Care Excellence (NICE) determines the cost effectiveness, or value, of newly approved drugs based on their impact on quality-adjusted life years. These determinations inform the National Health System’s (NHS) treatment-coverage decisions. In contrast, the FDA is prohibited from considering cost or value in its decision making, and there is no U.S. governmental equivalent of NICE.

The Institute for Clinical and Economic Review (ICER), a small Boston-based nonprofit, has taken a step towards value-based pricing by creating a NICE-like model. Development of a NICE or ICER-like post-approval value review, incorporating appropriate oversight and accountability, would help ensure coverage decisions remain fair and cost-effective, but it won’t be enough. The NHS is likely to impose care rationing because of escalating health and pharmaceutical costs. Any successful plan to manage rising drug costs must address multiple aspects of the problem, including value-based pricing, transparency, drug re-importation, and the reform of the Orphan Drug Act, to name a few.

A health care system’s goal should be to provide the best patient-centered care. Coverage decisions and resource allocations must prioritize value to patients — not insurers’ or pharma companies’ profits. If we are committed as a society to curing diseases such as SMA, dangling treatments like nusinersen just out of patients’ reach is cruel. Collectively, government, pharma, insurers, hospital systems and physicians all have a role to play in providing access to the right care at justifiable cost.

A. Gordon Smith, MD, is a professor, vice chair of research, and chief of the Division of Neuromuscular Medicine at the University of Utah School of Medicine.